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CSD10 - Budapest

2. Panelists. Moderator: Mark Weseluck, Chief Business Development Officer, CDS Clearing and Depository Services Inc.Mark Gem, Head of Business Management, Clearstream InternationalRadoslaw Ignatowicz, Member of the Management Board, Krajowy Depozyt Papierw Wartosciowych SA (KDPW)John Woodhouse

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CSD10 - Budapest

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    1. CSD10 - Budapest After the meltdown – how CSDs are identifying, measuring and managing risks now Mark Weseluck - CDS May 22, 2009

    2. 2 Panelists Moderator: Mark Weseluck, Chief Business Development Officer, CDS Clearing and Depository Services Inc. Mark Gem, Head of Business Management, Clearstream International Radoslaw Ignatowicz, Member of the Management Board, Krajowy Depozyt Papierów Wartosciowych SA (KDPW) John Woodhouse, Director, Capital Markets, Thomas Murray

    3. 3 Impact on Market Turmoil on CDS CDS clears only cash market securities, not derivatives No participant defaults Added stress scenarios based on market turmoil and more frequent stress tests Stress testing continues to indicate exposures do not represent potential systemic impacts Stress test results reviewed with specific participants affected by increased risk exposure Backtesting results dropped below target confidence levels in CCP services following turmoil in fall, but have recovered to required levels

    4. 4 Lehman Brothers Default – DTCC’s Experience Lehman Brothers Inc. (LBI) was one of the 10 largest users of NSCC and DTC and also one of the largest users of FICC and DerivSERV Prior to LBI’s bankruptcy, DTCC undertook several risk mitigation measures: Placed LBI on heightened surveillance Changed DTC net debit cap for LBI Participated in emergency meetings with the New York Fed Issued Important Notices to DTC, NSCC and FICC members Tracked settlement activities and exposures (e.g. ACATS volumes, intraday settlement debits) Monitored Barclays Capital’s discussions about purchasing LBI or certain LBI assets

    5. 5 Lehman Brothers Default – DTCC’s Experience SIPC trustee appointed on Friday, September 19 DTCC’s responses: Ceased to accept new LBI trades as of September 19 Lowered DTC net debit caps (Sept. 19) Reversed ACATS instructions (Sept. 19) Obtained guaranty from Barclays Capital for its purchase of LBI assets (Sept. 22) Informed members of LBI wind-down (Sept. 22) Liquidation process for Mortgage Backed Securities adopted (Sept. 22) Ceased acting for LBI and hired investment manager to liquidate LBI portfolios (Sept. 24) FICC and NSCC portfolios subsequently locked and hedges placed (Sept. 25 and 26)

    6. 6 Market Turmoil Impact on CDS Clearing and Depository Activity

    7. 7 Financial Performance Impact Strong exchange trade volumes have achieved maximum fee discounting Non-exchange trades volumes at plan Depository revenues for custody positions and volume of transactions lower than plan CDS continues to meet key financial ratios

    8. 8 Operational Impact Record exchange trades volumes on several days with peak at almost 1.6 million trades High clearing volumes successfully settled Some slower processing of trades and messaging on peak days Improved processing time and increased clearing capacity to 3.5 million exchange trades/day 70% improvement from application re-engineering and optimization efforts 30% from disk storage upgrade Enhanced capacity planning methodology to better take account of trade volume levels and volatility and trigger capacity concerns earlier

    9. 9 Panelists Mark Gem, Head of Business Management, Clearstream International Radoslaw Ignatowicz, Member of the Management Board, Krajowy Depozyt Papierów Wartosciowych SA (KDPW) John Woodhouse, Director, Capital Markets, Thomas Murray

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